Building an adequate nest egg is possible through the Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). Canadians can max out their contribution limits yearly to achieve long-term financial goals.
Unfortunately, many Canadians, including the middle class, can’t fill both tax-advantaged investment accounts to the brim due to financial constraints. Many end up contributing to just one instead or the TFSA only because of the smaller contribution limit.
If you plan to build a sizeable nest egg using your TFSA, consider taking positions in two growth stocks. Nutrien (TSX:NTR) and Exchange Income (TSX:EIF) are buy-and-hold assets for wealth builders. The average dividend yield of 3.83% is decent, super-safe, and sustainable for the long haul.
Top Agri stock
Nutrien delivered record earnings in 2022, notwithstanding the unprecedented supply chain disruptions and market volatility across agriculture, energy, and fertilizer markets. The $49.2 billion potash and fertilizer company provides crop inputs and services and operates a world-class production, distribution, and retail facility network.
In the 12 months that ended December 31, 2022, total sales and net earnings rose 37% and 142% year over year to US$37.88 billion and US$7.68 billion. Ken Seitz, Nutrien’s president and chief executive officer (CEO), said, “We returned $5.6 billion to shareholders, invested in our global Retail network and advanced a number of long-term strategic initiatives that position our company for future growth and sustainability.”
Management allocated US$1.2 billion of growth capital in 2022 to advance strategic initiatives across the Retail, Potash, and Nitrogen businesses, including the Retail network expansion. Sietz added, “The outlook for our business is strong as we expect global supply issues to persist and demand for crop inputs to increase in 2023.”
Nutrien expects to reach 18 million tonnes of annual operational capability in 2026. Besides approving a share buyback (5% of Nutrien’s common shares) over 12 months, the board approved a 10% hike in the quarterly dividend. At $98.56 per share, the current dividend offer is 2.82%.
TSX’s top agriculture stock has rewarded investors with a total return of 190.69% in three years, which translates to a compound annual growth rate (CAGR) of 42.67%. Given the low 13.54% payout ratio and long growth runway, there’s plenty of room for dividend growth in the near future.
Dividend grower
Exchange Income is a suitable complement to Nutrien. The share price is $51.35 (-1.65% year to date), while the dividend yield is 4.85%. Performance-wise, the industrial stock is a winner owing to the 328.64% return in three years (62.37% CAGR). Its monthly dividend has increased 16 times since 2004.
The $2.19 billion acquisition-oriented firm grows the business through its diversified family of companies. Management also expects them to deliver dependable returns to shareholders, regardless of the economic environment. The full-year 2022 results aren’t out yet, but the third quarter last year was among the strongest in EIC’s history.
In the third quarter of 2022, revenue and free cash flow increased 47% and 43% to $587 million and $69 million versus 2021. Notably, net earnings grew 123% year over year to $49 million.
Long-term hold
Growth stocks Nutrien and Exchange Income are excellent options for TFSA investors building a nest egg. Apart from tax-free money growth, TFSA withdrawals in your sunset years are tax exempt.
